I'm Lawrence O'Donnell, in for Ed Schultz this week, who of course has gone fishing.

Some liberals are outraged because President Obama seems like he's being overly accommodating to the "Party of No." But as of now, that's better than the alternative.

I'll explain why in my "OpEd."

Why are some Democrats hedging on health care reform? Because they fear socialist death care makes for a catchy attack ad in 2010.

I'll talk to a conservative who is plotting a run for Senate in 2010 to find out how he thinks Republicans will use the issue in the next campaign.

Just how out of control are the screaming mobs now? Today we got new details about swastikas, lynching jokes and death threats.

Plus, how liberal groups plan to step up their ground game. That's at the half-hour.

And are all lobbyists all bad all the time?

But first, tonight's "OpEd."

Liberals are fed up with President Obama's effort to reach out. Today the president invited six Senate Finance Committee members who are working on bipartisan health care reform up to the White House. The group included three Republicans-Senators Mike Enzi, Olympia Snowe and Chuck Grassley.

Wyoming Senator Enzi was quoted this morning in "The Wall Street Journal" claiming that the screaming mobs are proof Americans don't like the Democrats' plan. He says they need to work for a plan that doesn't rile voters, while failing to mention that the riled voters are actually part of a coordinated effort funded by the insurance industry.

So why is the president still trying to work with Republicans like Mike Enzi who comes from the most conservative state in the union and represents fewer people than the population of Staten Island?

Consider this: If the Democrats had 60 votes for health care reform locked in, they wouldn't still be trying to get Republicans. They're really using the Republicans for cover. Right now the president trying and failing to win Republicans looks much better than the president trying and failing to win all of his Democrats.

Joining me now, New Jersey Senator Robert Menendez, member of the Senate Finance Committee.

Senator Menendez, let's go back to basics here. We're getting a feeling already for some leaks about what's coming out of the Senate Finance Committee. And consistent with all the other committees, what seems to be coming out of the Senate Finance Committee is not universal coverage.

What happened to universal coverage? Each one of these bills out of the committees does no better than get to 95 percent coverage some years down the road, leaving tens of millions of people without health insurance.

SEN. ROBERT MENENDEZ (D), NEW JERSEY: Well, our goal is universal coverage. However, you have to pay for that as well. And part of the challenge is finding the pay-fors for trying to assure all of that. But clearly, we're going to be at a point at the end of the road.

You know, everybody is looking at these individual bills and making their judgments on it. What we need is the final product that we're going to be offering, and at that final product I hope we'll get further beyond that 95 percent.

O'DONNELL: You're in the Finance Committee. You have jurisdiction over taxation. Is there any chance that the three new top tax brackets that the House Ways and Means Committee passed could possibly pass the Finance Committee?

MENENDEZ: Well, I think certainly not if we want to see the bipartisan effort that is under way. After that, if that falls apart by September 15th, then it is possible that some of those might be considered. But I honestly believe we're trying to keep this within the context of health reform overall, and that's why we're looking at, how do we bring to the table the revenue stream that comes within both the contributions by different sectors of the health care system, as well as how do we keep any other revenue raisers within that context as well?

O'DONNELL: So, when you go up to New Jersey for the recess during August, and you're on the Jersey shore, and people are asking you-they're worried about those three top tax brackets which, by the way, would hit New Jersey, New York, Connecticut, California, states like that much harder than the states of the senators who are, for example, represented in that six-senator meetings that are going on right now. Are you going to basically tell them, look, forget about that part of the bill, these are the things to concentrate on, these are the things that I think we are likely to pass?

MENENDEZ: Well, what I'm going to tell them is that, first of all, we don't have a final bill. And all of the speculation is exactly that, speculation.

We're going to have to look, at how do we ensure affordability? I just came from a Finance Committee of Democrats and affordability is a big issue.

We have to make sure that anything that we do at the end of the day is affordable to middle class working families. We have to make sure that we stop the growth in the cost of insurance for everybody who has it. And at the same time, we have to find a way to cover the maximum amount of people who have no health insurance today. That's our ultimate goals.

Now, there's a difference between, as I always say, the destination, the end point, and the journey. The journey has a lot of twists and turns. It isn't always pretty. But time and time again, Democrats find a way, whether it's on a stimulus package, equal pay for equal work, children's health care, and a whole host of other things, to do it the right way.

O'DONNELL: Senator Menendez, before you go, I can't let you leave without asking you what it felt like to vote for and witness the confirmation of the first Hispanic justice on the United States Supreme Court? And then, secondly, how you think the politics for this play out for Republicans in the next election, the way they lined up against her in such big numbers?

MENENDEZ: Well, look, for me, it was a personal privilege. Sonia Sotomayor and I were born in the same year, we grew up on different sides of the Hudson River, her in a public housing project, I in a tenement. If you told me then that I would be one of 100 United States senators voting on the confirmation of her for a Supreme Court justice, we probably would have told you neither one of those things were likely. But it's the promise of America fulfilled and it's a promise we fight every day to keep a reality for future generations of Americans.

As to my Republican colleagues, you know, it's hard to tell the Hispanic community that when you have a woman who was Phi Beta Kappa at Princeton, on the "Yale Law Review," became a tough prosecutor in New York City, went on to get appointed by a Republican president to the district court-of the federal district court, and then by a Democratic president, passed by Congresses, both Democrats and Republicans at the time, and you have a great history of precedent, commitment to precedent, the Constitution and the rule of law, and you still say to a Latina like that, I can't vote for you, it sends a message to the community that, no matter how hard we try, no matter how hard we work, no matter how many barriers we break in pursuit of excellence, that somehow you still find us lacking.

I think that's a problem for Republicans.

O'DONNELL: Senator, I'm glad you were lucky enough to be there today to cast that vote. Thanks for joining us today, Senator Menendez. All the best.

A pretty big Republican vote against her. It seemed to me to be motivated in many cases by Republicans who fear being challenged on their right in primaries coming up in the next cycle, but what does it do to national Republican candidates? What does it do to the next Republican nominee for president and the next one after that?

JAMAL SIMMONS, DEMOCRATIC STRATEGIST: You know, Lawrence, this is a problem with the Republican Party and when they get into some of the politics around-particularly around Hispanic and ethnic politics. You know, when it comes down to social values, the Republicans ought to be able to make the case to some Latina voters. Many of them are Catholic, many of them are pro-life, many of them have traditional families and traditional family values. But then it comes down to some question like whether it was English-only in California or it's Judge Sotomayor.

Republicans just can't seem to cross the final barrier to say, you know what? We're all in this together, we're all Americans, we're all equal. And if they could ever reach that point, I think they would be in a better position. But instead, it comes down to these issues, and they go so far to the right and against someone who's as qualified as Justice Sotomayor, and it really just wears thin I think in the community.

O'DONNELL: John Feehery, this vote for someone like John McCain, the first time he ever votes against a Supreme Court nominee, and he is being challenged on his right by one of the founders of the Minutemen, the anti-illegal immigration movement, down there in his state. And so, there's John McCain making a political calculation based on his short-term reelection prospects to the United States Senate, and at the same time creating a serious problem for the next Republican nominee for president, the next person who has to run countrywide, picking up votes from every ethnicity, from every group out there, unable to just peel off sections of the electorate like they used to be able to do.

This looks like really shortsighted politics for the national party and a trap. They fell into the "wise Latina woman" trap. They found themselves voting against her today, and really, really hobbling the party in the future.

Go ahead. Tell me I'm wrong.

JOHN FEEHERY, REPUBLICAN STRATEGIST: Hey, Lawrence.

First of all, I think Jamal is right in the sense that this is a part of voters that we really need to do a better job of communicating to, because I do think that on a lot of the values issues, a lot of Hispanics and Latina voters should vote Republican. That being said, I don't think that this vote in the long term is going to hurt Republicans.

I do think that, Lawrence, part of your analysis is correct, that some of these people voted against her because they were worried about the primary. And I think that's probably true. I think a lot of other Republicans voted because they didn't like where she stood on some of the issues.

That being said, in the next presidential election, it's not going to be Sotomayor. It's going to be, how do you communicate to us? What are your economic policies? Where are you on certain issues on the value of life and things like that?

And those are the things that Republicans have had to do, reach out to the Hispanic community in a much more concerted effort. They need to do that and I don't think this vote is really going to change that need for outreach.

SIMMONS: John, that's where you're wrong, because when it comes down to the next election, Justice Sotomayor's vote is going to be a very key issue that Democrats and Hispanic leaders will be reminding the community about what happened here.

FEEHERY: Jamal, I disagree with that. I disagree with that 100 percent.

I think the next vote-it's not what you did two years ago that's going to matter, or three years ago, it's what you're doing for me lately. And that's what politics is all about.

Lawrence, you know that better than anybody.

O'DONNELL: Sam Stein, referee this one from your fair perspective at "The Huffington Post." Which party wins and loses over this vote today?

But let me segue into the topic of the day, which is health care, and it sort of complements all these points.

The Latino community is disproportionately uninsured in America, and solving health care, from what I understand talking to Latino-based strategists, even Republican strategists, is that solving health care reform would actually benefit the political party, who does it, because Latinos would be more inclined to vote for someone who helped provide them with health insurance coverage. So, yes, we have to deal with substantive issues when you're talking about the Hispanic voting basis, and the Sotomayor confirmation hearing is one of them. But actually, health care reform, I contend, will be a much bigger issue come 2010 when you're talking about how the Hispanic base votes.

O'DONNELL: Beautifully done on that transition, Sam. Thank you very much for that.

STEIN: Thank you. I appreciate that.

O'DONNELL: Coming up, why are some Democrats getting cold feet about health care? They are worried about wild accusations in the next campaign that they're all socialists. We'll hear from a conservative who may challenge Senator Chris Dodd, next on THE ED SHOW.

What are the Democrats afraid of when it comes to the health care debate? It's not people shouting them down at town hall meetings now. They're afraid because it's hard to explain a hugely complex policy and very easy to distort it.

My next guest has formed an exploratory committee for the 2010 Senate race in Connecticut. He is a Republican who would challenge Chris Dodd, the acting chairman of the Senate Committee on Health, Education, Labor and Pensions, and the driving force for a public option.

Peter Schiff is the president and chief global strategist of Euro Pacific Capital, a Westport, Connecticut-based brokerage firm. He's also the author of the book "Crash Proof: How to Profit From the Coming Economic Collapse."

Peter Schiff, your book coming out in 2007 predicted everything we're going through now, with the recession and the collapse and the markets and all that.

Exactly. And more important, it predicted all the foolish things the government would do to try to solve the problem and why all those things would make the problem worse.

O'DONNELL: OK. So let's say you get the money and you're running for Senate in Connecticut in 2010. What's your position on health care reform?

SCHIFF: Well, first of all, I want to make sure that Chris Dodd doesn't have a chance to do for health care what he did to the banking industry. You know, the problem with health care is that it's too expensive, and the reason it's so expensive is because of government involvement in the system, and because of an overutilization of insurance because of tax subsidies that force people or get people to buy insurance to cover ordinary medical expenses.

O'DONNELL: OK. In the campaign you're going to have 30 seconds to say what you're in favor of.

SCHIFF: I'm in favor of free markets. I think the free market can deliver quality health care at lower costs.

O'DONNELL: So, legislatively, to shorthand that, you're in favor of nothing? You're in favor of doing nothing? That's what the free market is.

SCHIFF: No, no. I'm in favor of doing something-getting the government out of the market.

You have to remember what insurance is for. Insurance is to pay for catastrophic events that are unlikely to happen. People have fire insurance because their house probably won't burn down.

O'DONNELL: So, you want to remove all the government regulations, state and federal regulations in place right now, to prevent health insurance companies from abusive practices?

SCHIFF: No, I want to...

O'DONNELL: You want to let them continue to deny anyone who has a pre-existing conditions, to put limits on the policy? You want bankruptcy-it's the number one cause of bankruptcy-to continue to be the failure of the health insurance system?

(CROSSTALK)

SCHIFF: No. You have to understand why health care is so expensive. If you look over the last six years, the cost of...

O'DONNELL: And is there a single thing-let me ask you this-is there one thing that you have read in any one of the bills, in any one of the proposals in the Congress, that you're in favor of? Is there one sentence that you're in favor of?

SCHIFF: I am not in favor of the government getting more involved.

O'DONNELL: Is there one sentence you're in favor of?

SCHIFF: No. What I want to do is I want to bring market forces back to play to control costs and have...

O'DONNELL: So, in everything you're aware of in the House bills or the Senate bills, there's not a single thing that you're in favor of?

SCHIFF: No, the bills are bad.

O'DONNELL: You would say no to every sentence in those bills?

SCHIFF: Because all they're going to do is drive costs up further and drive down quality. We need market dynamics, just like we have in every other industry.

O'DONNELL: If they do pass health care reform, Chris Dodd's going to come back to Connecticut as one of the heroes of the health reform crusade, having led it.

O'DONNELL: And your campaign will stand there and say every single sentence of the legislation he passed was bad?

SCHIFF: Right. I will tell the truth. I will tell the public that there is no Santa Claus, that whenever the government comes and promises you something for free, you better watch out, because it's going to cost a lot more than you think.

O'DONNELL: So you would have the government pull out of the Medicare system? You'd abolish that, right?

SCHIFF: Well, obviously...

O'DONNELL: It's a complete single payer, government-run system health care system. It's as socialistic as the Canadian system.

SCHIFF: Yes.

O'DONNELL: It's for everyone 65 and older. And you would say end that tomorrow?

SCHIFF: Well, look, because you built up this culture of dependency over the years. You can't turn it off overnight.

O'DONNELL: Those lazy dependent seniors in Connecticut; right? Those lazy Connecticut citizens over 65 who refuse to pay for their own health care?

SCHIFF: Don't put words in my mouth. If the government hadn't taxed the hell out of these people while they were working, they would have enough money to afford their own health care, and it would be a lot less expensive.

We need market dynamics and market forces. Insurance is driving the course of health care through the roof just like government-subsidized student loans have driven education tuition through the roof, just like subsidized mortgages drove housing prices through the roof.

The government is distorting the free market. It is the root cause of our problems. And there are no solutions that involve more government.

The only solutions involve the free market. They involve capitalism. And health care is important, just like food. We don't want the government growing our food.

O'DONNELL: So you think the massive subsidies that we give to college students in this country to go to college for free, government subsidies, you think that explains tuitions?

SCHIFF: Yes, it benefits-yes, of course.

O'DONNELL: Can you tell me-you're in New York City right now. You know what a private school tuition is for a high school in New York City? It's over $30,000. There's not one penny of government support for that tuition.

SCHIFF: Well, you're talking about elite private schools in New York City.

You look at what private...

(CROSSTALK)

O'DONNELL: You explain every rising price in this economy as being the product of government intervention. What about in markets where there's zero government intervention? How does the price pull (ph) out?

SCHIFF: Look, hold on. If students couldn't get government-guaranteed student loans to bid up college tuitions, do you think universities could charge these outrageous prices if students couldn't borrow the money to pay them?

(CROSSTALK)

O'DONNELL: Look, it is such a small sliver of what goes into...

SCHIFF: No it's not.

O'DONNELL: ... the tuition mix. The reasons tuitions go up is because teachers' salaries go up over time. They go up directly proportionately.

SCHIFF: But why isn't there competitive forces keeping them down? It's not salaries for teachers, it's the administrative bureaucracy.

The beneficiaries of the student loan programs are the universities, and our kids are graduating from college now hundreds of thousands of dollars in debt. Why is that a good thing?

O'DONNELL: All right. Chris Dodd is the leader of the Education Committee, too, so you're going to have a good debate with him about free market education in Connecticut.

But just to get you clear on the record now, if you were in the United States Senate now, ,and if you were voting on health care reform this year, you would vote no to every single proposal made by a Democrat or Republican in the Senate this year; right?

SCHIFF: Well, it depends on the proposal. The ones on the table now, yes.

(CROSSTALK)

O'DONNELL: Is there a single proposal by Chuck Grassley or any of the Republicans in the Senate that you would vote for? Is there a single sentence you would vote for from Chuck Grassley?

SCHIFF: One thing that I would support would be reducing income taxes and then making...

O'DONNELL: OK. That's not...

SCHIFF: No, hold on. Let me finish. Let me finish my point.

O'DONNELL: There's not a single thing that any Republicans has suggested that you would vote for.

SCHIFF: And then I would tax health care benefits as ordinary income, because I want to take away the preference...

Peter Schiff is in favor of raising taxes on Connecticut citizens who have private health insurance.

SCHIFF: No. I want to lower taxes. No, I want to lower taxes.

O'DONNELL: You want to lower the income tax, but you want to raise taxes on health care benefits.

SCHIFF: No. But there's no net increase.

O'DONNELL: There sure are taxes on health care benefits now. How much do you want to raise them to?

SCHIFF: I want to raise them enough to offset the reduction in income taxes. I want people who now get health insurance from their employers to get money, to get wages instead that are not taxed, and they can make a decision if they want to buy health care or if they want to buy something else, or if they want to buy a major medical that covers catastrophic illnesses.

O'DONNELL: Give Chuck Grassley a call. He's the leading Republican on the Senate Finance Committee. He too is currently in favor of raising taxes on people's private health insurance...

SCHIFF: But I only want to do it if we cut their taxes.

O'DONNELL: You have found one sentence of agreement with the Republicans...

SCHIFF: I want to really reform it by bringing the free market back into it and getting the government out of it.

O'DONNELL: Right. All right, Peter. Thank you very much. We've got to get out of here.

Coming up, the organized fight against reform. Lobbyists have become the bad guys. Lobbyists have done some of the dirty work, that's for sure, but not all lobbyists are bad. Seriously.

My take on that next.

(COMMERCIAL BREAK)

O'DONNELL: Welcome back to THE ED SHOW.

When I went to work in the Senate, I thought most lobbyists were criminals like the most infamous of them all, Jack Abramoff. But I was wrong.

In those pre-Abramoff days, none of them were that bad. Some of them surely were criminals at heart, but they feared the law too much to break it and there was way too much money to be made perfectly legally to ever risk jail time.

I was chief of staff of two Senate committees back then, first Environment and Public Works, then the all-powerful Finance Committee.

Environment and Public Works is an odd mix of jurisdictions, basically protecting the environment and billing highways, courthouses, and order federal buildings. If you wanted to protect wetlands or an endangered species, of if your company poured concrete, your lobbyists desperately needed to see me.

Lobbyists for the biggest construction companies in the country tried to talk their way onto my schedule all the time. And when I moved to the Finance Committee in 1993, every lobbyist in town needed to see me because the committee's jurisdiction is so vast.

The corridor outside my office in the Dirksen Senate Office Building is actually known as "Gucci Gulch," because it's constantly patrolled by lobbyists.

My own sleaziest encounter with a lobbyist occurred in my Finance Committee office. One lobbyist who I didn't know somehow got 15 minutes on my schedule to describe the unbearable suffering AIG was being forced to endure because of some corporate tax provision or other that he wanted to get repealed or amended or something such. I feigned interest, I nodded a lot, maybe even led a hint of sympathy into my eyes and said nothing. If he told his masters that I was anything but noncommittal, he was lying.

The next day, one of our staff rushed into the office. She had just opened an envelope addressed to me and was shaking as she handed it to me.

It was from the AIG lobbyist, a letter thanking me for the meeting, and a check made out to my boss' reelection campaign. I would not even use a sheet of Senate stationery to reply.

Instead, I hand-wrote a very harshly-worded version of, "How dare you?"-and that's cleaning it up-on the lobbyist's letter and sent it back to him with that check. I didn't have to check with my boss, the late New York Democrat Daniel Patrick Moynihan, to know that is what he would want me to do. He was always impervious to the influence of campaign contributions and ran his campaigns on one-tenth the amounts that his successor, Hillary Clinton, raised to win his seat.

There are honorable lobbyists. I dealt with them every day. By "honorable lobbyists," I do not mean only those who do pro bono lobbying for charities or the underpaid lobbyists working for environmental groups. When a giant corporation, let's say Kodak, sends its very high-priced lobbyist to see you, to talk about how Fuji is subverting international trade agreements, you listen, because Kodak is the last manufacturer of film left in the United States, and the single biggest employer in Rochester, New York.

Yes, Kodak's lobbyists are trying to protect corporate profits, but they are also trying to protect American jobs and save Rochester from becoming a ghost town. Only the most zealous Marxist could fail to see the honor in that lobbying campaign.

Good lobbyists tell you something you don't know, like why teaching hospitals need more money for doctor training. They then tell you what they think you should do about it, how to pay for it, and most important, who opposes it and why. They know their opposition is going to be lobbying you too, so they don't say anything that can be proved wrong in your next meeting. And they don't promise their clients that they will always get what they want.

There are not enough Congressional staffers to keep track of the hundreds of thousands of complex issues under federal jurisdiction. Good government needs good lobbyists.

Our defense against the toxic mix of bad lobbyists and campaign cash, it always comes down to the people we vote for.

UNIDENTIFIED FEMALE: Now these energy guys that are going to be there tonight, obviously they're going to want to hear how you're voting on the energy deregulation bill.

UNIDENTIFIED MALE: Well, it depends on what is in it when it comes out of committee.

UNIDENTIFIED FEMALE: Sends a very bad message to the big contributors if you vote against it.

UNIDENTIFIED MALE: Hey, if you can't drink their booze, take their money and then vote against them, you don't belong in this business.

(END VIDEO CLIP)

O'DONNELL: Yes, "The West Wing" was a fictional universe, but I would not have written that scene if I never saw senators let lobbyists make their cases, contribute money to their campaigns, and then vote against them.

There is a massive amount of special-interest money from the health care industry sloshing around in the campaign coffer of our senators and Congressmen as they consider health care reform legislation. Let's just hope that enough of them still know how to take the lobbyists' money and vote against them.

Coming up, the screaming mobs hit a new low, a lynching threat and a death threat. We'll talk about it, next.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

OBAMA: Justice, equality, and opportunity are the very ideals that have made Judge Sotomayor's own uniquely American journey. They are ideals she has fought for throughout her career, and the ideals the Senate has upheld today, in breaking yet another barrier, moving us yet another step closer to a more perfect union.

O'DONNELL: Welcome back. Late today, the Senate confirmed Sonia Sotomayor to be the first Hispanic justice of the United States Supreme Court. The vote was 68-31, with nine Republicans voting for her. Among them, four of the party's six retiring senators.

Who said the Supreme Court vote was about principle, not politics? For more, let's bring in Senator Ben Cardin, a member of the Senate Judiciary Committee.

Senator Cardin, were you surprised by the vote tally?

SEN. BEN CARDIN (D), JUDICIARY COMMITTEE: Well, Ed, we were thankful there were nine Republicans that had the courage to vote for her confirmation. We're obviously disappointed that there wasn't more who joined.

Look, Judge Sotomayor has the qualifications. She has the background. She has the commitment and understands the role of a judge. She's mainstream. She believes in judicial precedent. She's just eminently qualified to serve on the Supreme Court.

She has more experience as a federal trial judge than any judge in 100 years. Her record deserved her confirmation.

O'DONNELL: Senator, it seemed to me from the start that this particular justice, voting for this confirmation was a good vote for both parties. In raw political terms, both parties have an interest in appealing to the Hispanic vote. How did the Republicans get this vote so wrong?

CARDIN: I don't think I can really answer that. Today is a day to celebrate. It's interesting that Judge Sotomayor was appointed as a federal judge by a Republican president, and also as a federal judge by a Democratic president. They got it right when they confirmed her to the district court and to the court of appeals. I think those that voted against her just got it wrong today.

And she's now a justice-will be a justice on the Supreme Court of the United States. I think her record will show that those who voted for her confirmation did the right thing. And this is a moment in history.

O'DONNELL: Senator, you have a recess coming up for a month when you'll be hit with a lot of questions from your constituents about health care reform. It's obviously difficult for you members of the Senate, who don't really know where the Senate is going on various policy issues. How do you handle that? You have the House of Representatives voting for three new top tax brackets. In the Senate side, that's probably not going to happen. What do you choose to defend and argue in favor of when you're talking about this with your constituents in August?

CARDIN: Well, my message is going to be simple. If we just do nothing and maintain the status quo for the average family in Maryland, their familiar insurance premiums will go up from about 12,000 dollars to over 20,000 dollars in the next ten years. They're already paying 1,100 dollars in a hidden tax for those who don't have insurance, those who have insurance are paying it.

I'm going to explain that what is common in all of the plans that are moving through Congress. And that is to protect your right to keep your insurance, and to try to make it more affordable. If you look at the insurance reform that's included in this package, that will prevent insurance company from denying you coverage if you happen to get ill, or it will eliminate the limits-caps that are in your policy, that allow you to see a doctor for preventive health care and tests without having to pay these large deductibles and co-payments.

There's a lot in this bill that's going to help the people in Maryland who have insurance keep their insurance.

O'DONNELL: Senator Cardin, I know it's been a busy day on the Senate floor. Thank you very much for finding the time to join us here.

CARDIN: Thank you very much. Appreciate it.

O'DONNELL: Coming up, responding to the screaming mob. How liberals plan to step up their ground game, next in the playbook.

(COMMERCIAL BREAK)

O'DONNELL: In the playbook tonight, the battle over health care reform is getting louder, much louder. Members of Congress, home for the August recess, are being shouted down at town hall by organized sign-wielding mobs trying to kill civilized discussion. Now the Congressmen, their staffs and support groups are all trying to figure out how to fight back.

Joining me now, Democratic Congresswoman Jan Schakowsky of Chicago.

Congresswoman Schakowsky, what's your plan? How do you handle this?

REP. JAN SCHAKOWSKY (D), ILLINOIS: First of all, organized is right. This is not about town meetings. This is about political organizations turning out people to stop debate, to stop conversations. That's what the Republicans and these special interests are trying to do.

Town meetings, I don't know if you went to them when you worked for the Senate, but people do get kind of hot. They come with their own particular interests and are there to ask a question, even to pressure the member of Congress, but not to absolutely shut off debate.

What it's become now-we're not going to whine about it. We can do turn out. If they turn out 100, we'll turn out 200. But what about the ordinary constituent who's coming to actually learn something? What does this health care program mean to me? I'm a senior, or I'm a-I can't get health care, because I have a preexisting condition. What happens to me? Or even I don't want to pay more taxes, and so what is that going to do to me?

All of that kind of debate is completely shut down. But I'll tell you, I think the tide is turning in that respect. My office, anyway, is getting real positive calls today about how-from people who really liked this health care plan. But it's turned into a theater that is depriving ordinary constituents in districts around the country from actually meeting with their Congressmen, and finding out what they need to know.

O'DONNELL: We've actually seen something like this before in my memory in Chicago, actually, when Danny Rosinkowski (ph) was hounded by some protesters. Let's look at the videotape of that from 1989.

These were seniors who were protesting a Medicare provision that would have provided long term care, which actually he was key in passing that, and they were surrounding his car. He was having trouble getting out of there.

SCHAKOWSKY: Actually I was-

O'DONNELL: You actually organized this very organized protest, didn't you?

SCHAKOWSKY: No, no. Actually not. I was there that day, as head of the State Council of Senior Citizens. Very different. The Congressman would not come in and talk to that group of seniors who were upset about the catastrophic health care bill, that didn't provide long-term care to seniors. So it wasn't as if they wanted to stop him from talking. He wouldn't meet with that group. So they began to go after him when he was leaving the building, right in the middle of his district. These were actual constituents who had come out, that wanted to get a report back from the leaders who met with him, and what's going on with this program that didn't turn out so great in their estimation.

So the motivation was different. The action was very different. They actually wanted to have dialogue with their Congressman.

O'DONNELL: Well, they actually ended up forcing a repeal of what he managed to get passed. Rosinkowski's reaction to this is interesting, because it's very similar to what we're hearing today. Let's listen to what Danny Rosinkowski had to say at the time.

DANNY ROSINKOWSKI, FMR. POLITICIAN: They don't understand what the government is trying to do, but it's always their problem.

UNIDENTIFIED MALE: Do you sympathize with their anger?

ROSINKOWSKI: No, I don't think they understand what's going on.

(END VIDEO CLIP)

O'DONNELL: You hear that today, Congresswoman, that these protesters standing up at these meeting simply don't understand. They don't care what's going on. They're just there to disrupt.

SCHAKOWSKY: No, actually I use this example as a cautionary note for my colleagues. You know, all the smarty-pants in Washington had figured out-and I think motivated well-that this was going to be good for seniors. The AARP was on board. My national organization, National Council of Seniors, was on board. But they forget to check back with the grassroots people, because when it comes to health care, Lawrence, this is different from other issues, even energy.

What people do is they take pen to paper, and figure out exactly what it is going to mean to them. This was a bill where seniors had to pay premiums two years before the plan actually went into existence. They bore all the costs, as Medicare recipients for this. It wasn't distributed among the population.

So the grass-roots people didn't like this. So I've been saying we better definitely check back with ordinary folks, but I think we have a very strong bill right now that we can actually do that, if we do get a chance to not be disrupted by these people. But if they want to organize, we'll out-organize them. OK, it's all right.

O'DONNELL: For a strategy on how to combat these town hall uprisings, let's bring in Roger Hickey, co-director of the Campaign for America's Future. Roger, you sent out an e-mail today advising people how to go about countering the protests. What are you advising? What's the strategy?

ROGER HICKEY, CAMPAIGN FOR AMERICA'S FUTURE: We have a network of activists around the country who are dedicated to moving health care reform, and they've been working at this for the last two years. This is not new to us. We have been knocking on doors. We've been moving people to meetings with their members of Congress for two years.

We're simply doubling up our game. We are putting people into every single meeting that's going on in the Congressional districts. And we're doing advertising around the country as well.

The thing about the highly publicized people who are disrupting meetings is that they are representing special interests who really don't want anything done. And the vast majority of Americans, as we see in these town meetings, want to see health care reform. And they want to see it done by this Congress.

So the difference is one set of people are trying to disrupt and stop health care reform; the others really want some change. And we're doubling up our efforts in every community in the country, while the Congresspeople are back home.

O'DONNELL: Roger, what do you do in the middle of the town hall meeting when the chaos breaks out? When you have 250 people there to listen, and 15 who are there to yell and scream. Those 15 can cut off any dialogue, can't they?

HICKEY: In some highly publicized cases, that has happened. Congressman Doggett got mobbed the other day. But just the next day, he got back on the horse, went out and had another couple of town meetings and had a very, very good dialogues with his constituents. So members of Congress want to talk to their constituents. And frankly, their constituents resent it, if they are prevented from having that dialogue with their members of Congress while they're home.

O'DONNELL: Roger, you think there's a backfire here, the imagery of all this yelling and screaming actually backfiring on the Republicans and making it look like that's their position, is simply yelling and screaming.

HICKEY: It's a terrible image for the Republican party and for the special interests, like the drug companies, who are trying to sabotage health care reform. The majority of American people want health care reform. They just want more details. And the people who want to stop it, they're going to is suffer the consequences.

O'DONNELL: Thank for joining us, Roger Hickey. Coming up, the Democratic candidate for Virginia governor is losing independents. Can President Obama help him rebound? The president's campaigning for him right now. I'll put it to our panel, next.

(COMMERCIAL BREAK)

O'DONNELL: Just moments from now, President Obama will speak at a fund-raiser for a Virginia gubernatorial candidate Creigh Deeds. A new poll has Republican opponent Bob McDonnell up by eight points in the newly blue state. The GOP is pinning its hopes on McDonnell. The race may be the party's last chance for a game changer this year.

Let's bring back our panel, Jamal Simmons, Sam Stein and John Feehery. Sam Stein, when I was working for Senator Moynihan, he used to say to fellow Democrats, I will come to your state and campaign, if that will help. Or I'll stay away if that will help more. Which one helps more in Virginia. Should Obama be down there?

STEIN: I think any Democrat would be foolish not to accept a visit by the president. He draws a ton of crowds, a ton of enthusiasm, and hopefully a ton of money for Creigh Deeds. The problem is you set the expectations a bit too high. I know there's an enthusiasm gap in Virginia. They just have elected two Democratic, two straight Democratic governors, the first time in how many years a Democratic president. It's tough to get these people going to polls and getting excited again, when they have an election every four years for governor.

O'DONNELL: And they win by a hair when the Democrats do win in Virginia. John Feehery, Barack Obama's approval rate in Virginia is now at 51 percent. That's not bad for Virginia. Is it good enough to help a gubernatorial campaign.

FEEHERY: I don't think if he is going to go to Bristol, Virginia, it's going to help him very much. If he stays in Northern Virginia, I think it helps him a lot. It helps Creigh Deeds a lot. I think Sam is right. With raising money, it probably helps.

The fact of the matter is President Obama is not as popular in Virginia as he once was. I do think that you're right, that the tide is turning back towards Republicans. And Lawrence, let me say one other thing about Jan Schakowsky. Congratulations on exposing her unbelievable hypocrisy. You know, it's a mob when it's against her, but it's a patriotic crowd when the mob-

O'DONNELL: John, you got to learn to stick to the subject in this segment. We were not try to go expose Jan Schakowsky. We're just showing some echoes here.

FEEHERY: I know you worked at that bill. Congratulations.

O'DONNELL: Jamal Simmons, this polling in Virginia shows that 53 percent of Virginians -- 53 percent believe Barack Obama was born in the United States. Only 53 percent. This is a tough state for him to go down there and pull a Democratic candidate up eight points. Isn't it?

SIMMONS: It is a tough state. We've talked about this a little bit already. All these candidates who are running really have to run on Virginia issues. I spent a lot of time campaigning in the south, in places like Georgia, Tennessee, Florida, Arkansas. One thing I learned working in the south is that people aren't like the rest of the country when it comes to Democratic politics. They're still conservative when it comes to a lot of key issues.

So it is going to be very important for Creigh Deeds to campaign really as a Virginian, and not so much as a Democrat, in order to win this race.

O'DONNELL: What's the impact of a Republican win in Virginia on this race?

STEIN: I refuse to by into the notion that a Republican victory in Virginia will make Obama somehow a lame duck, which I've heard bandied about in certain places. But on what Jamal said, anecdotally, I talked to someone in Senator Mark Warners's office about what kind of phone calls they're getting about the health care debate.

They're getting overwhelmingly anti-Obama phone calls on the health care issue. I think Jamal is absolutely right. It's very tough to have Obama there and be associated with policies that may not be popular in Virginia. That's really the problem that Deeds is running into.

FEEHERY: Actually, the more significant race I think is in New Jersey. If Republicans win in New Jersey, then it's really tough for Obama. I think that's a signal that Republicans are back on. Virginia-

I think we got a good shot at Virginia.

O'DONNELL: But in New Jersey you have an incumbent governor, who has his own set of problems, that have nothing to do with Obama. Can we really use that as a barometer?

FEEHERY: No doubt about it, but I think it shows that the Democrat brand is not as great as it used to be.

SIMMONS: Lawrence, before we go, I have to say, you're a Hollywood guy, and I'm a little upset. We spent an entire hour and nobody mentioned that John Hughes died and no reference to "16 Candles" or "Breakfast Club."

O'DONNELL: It is a sad thing. He's 59 years old. "Entertainment Tonight" is going to do a good job with it tonight. That's all the time we have for today. That's THE ED SHOW. I'm Lawrence O'Donnell. I'll see you back here tomorrow, same time, 6:00 pm Eastern on MSNBC. "HARDBALL" with Chris Matthews starts right now.

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.